DONG Energy’s Wind Earnings Up, EBITDA Down in Q1 2017

DONG Energy reported an operating profit (EBITDA) from continuing operations of DKK 3.3 billion (EUR 443.5 million) in the first quarter of 2017, a 53.5% slide compared with DKK 7.1 billion in Q1 2016, despite a 21% jump in earnings from commissioned wind farms.

The decrease was in line with the company’s expectations and was driven primarily by a positive impact in Q1 2016 from one-off payments from the renegotiation of gas purchase contracts, as well as the divestment of the gas distribution network to in Q3 2016. These non-recurring items totalled DKK 3 billion in Q1 2016, DONG said.

Underlying EBITDA declined as a result of a very strong Q1 2016 in Wind Power, the company said, which included a gain of DKK 0.6 billion on the divestment of 50% of Burbo Bank Extension and high activity related to the construction of the German wind farms Gode Wind 1 and 2.

In 2017, partnership income in Wind Power is expected to materialise later in the year in connection with the expected divestment of 50% of Walney Extension and the construction of, among others, the Race Bank wind farm.

Gross investments during the quarter totalled DKK 2.5 billion, of which approximately 80% was invested in the continued expansion of offshore wind.

“We maintain our financial guidance for 2017, with EBITDA expected to amount to DKK 15-17 billion, which is equal to a growth of 4-18% in the underlying operating profit, and gross investments expected to total DKK 18-20 billion for the year,” Henrik Poulsen, DONG Energy’s CEO and President, said.

”Operations in Wind Power were in line with expectations in Q1. Following a January with weak winds, both February and March were close to a normal wind year. In addition, wind farm availability was satisfactory. Overall, earnings from commissioned wind farms were up by 21% compared to Q1 2016.”

Following the full commissioning of the 258MW Burbo Bank Extension offshore wind farm this month, DONG Energy now has five large offshore wind farms under construction, which are all progressing according to plan.

”The development of our portfolio of offshore wind projects for construction after 2020 is progressing steadily, both in terms of business development in new markets, including the USA and Taiwan, and in terms of participation in auctions in Europe,” Poulsen said.

”On 13 April, we were awarded the right to build three offshore wind projects in the German part of the North Sea with a total capacity of 590MW. For two of these projects, OWP West and Borkum Riffgrund West 2, we submitted a bid of EUR 0 (zero) per MWh, meaning that these projects will not receive any subsidies on top of the wholesale power price. The third project, Gode Wind 3, was awarded based on a bid price of EUR 60 per MWh.”

Poulsen sees the zero subsidy projects as ”a historical breakthrough for offshore wind.”

”We are seeing significant momentum in the offshore wind industry, with innovation and notably reduced costs creating new market opportunities and an ever-stronger value chain. Competitive intensity is escalating as more strategic operators have entered the scene, which also helps to further accelerate the development of offshore wind. We remain very well-positioned to take part in this significant potential for long-term, profitable growth,” Poulsen said.

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